Preview: A Youth Dialogue with ECB’s Lagarde on the COVID-19 response

The European Central Bank (ECB) President Christine Lagarde’s speech will be closely eyed ahead of the European Union (EU) Summit, aimed to reach an agreement on the coronavirus recovery fund. Lagarde is due to speak about the ECB’s response to the COVID-19 outbreak at the European Youth Event 2020, via satellite. Her speech is scheduled at 0730 GMT and there will be a Q&A session following her online dialogue.

The topics likely to be covered are – “How is the coronavirus affecting people, businesses and banks?” and “How can we limit the negative impact on Europe’s economy? “

Watch the event live here

No surprises are expected as ECB's Lagarde is likely to reiterate the need for the fiscal response to tackle the virus impact. “Lagarde has long been calling for fiscal stimulus, which the Eurozone governments are yet to deliver. The President is likely to reiterate the need for governments to do more and support the central bank's efforts in battling the virus-induced slowdown,” Omkar Godbole, Analyst at FXStreet, noted.

The latest ECB minutes showed, “it (the Governing Council) was fully prepared to increase the size of the PEPP and adjust its composition, and potentially its other instruments, if, in the light of information that became available before its June meeting, it judged that the scale of the stimulus was falling short of what was needed.”

The ECB is widely expected to increase the 375 million euros bond-buying in June with some predicting the increase as high at 750 million.

How could it impact EUR/USD?

According to Haresh Menghani, Analyst at FXStreet, “From a technical perspective, the pair's repeated failures near an important resistance point to persistent selling bias at higher levels. Hence, it will be prudent to wait for some follow-through buying above the 1.1000 mark, leading to a subsequent strength beyond the very important 200-day SMA, around the 1.1015-20 region, before positioning for any further near-term appreciating move.”

“On the flip side, any subsequent slide might continue to find some support near the 1.0900 mark, below which the pair is likely to fall further to the 1.0845 horizontal support. Failure to defend the mentioned support level now seems to pave the way for a further weakness back towards the 1.0800 mark,” Haresh adds.

Key Notes

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About Lagarde’s speech

The European Central Bank's President Christine Lagarde, born in 1956 in France, has formerly served as Managing Director of the International Monetary Fund, and minister of finance in France. She began her eight-year term at the helm of the ECB in November 2019. As part of her job in the Governing Council, Lagarde holds press conferences in detailing how the ECB observes the current and future state of the European economy. Her comments may positively or negatively the euro's trend in the short-term. Usually, a hawkish outlook is boosts the euro (bullish), while a dovish one weighs on the common currency(bearish).